How to find the best car loan
The best car loan for you is the one that suits your personal needs best. Not just the loan with the lowest interest rate. Car loans are packed with different fees, features, payment schedules and add-ons. Some of which can really help, or hinder, your repayments. To find the best car loan it pays to consider all of these factors.
The interest rate
The interest rate isn’t everything, but it is the biggest factor to consider with a car loan. No matter how many add-ons and special benefits you are offered, if the interest rate is well above average, it probably isn’t the best car loan for you.
So first, you should always look at the loans with the lowest interest rates. However, as long as your loan has a competitive interest rate, it doesn’t necessarily have to be the lowest on the market. Remember, the interest rate isn’t everything.
Another factor to consider is that the interest rate on your loan can be fixed or variable. If you prefer certainty over the size of your repayments, choose a fixed rate. If you feel the market could favour you, and interest rates might fall, you might want a variable rate.
Compare Car Loans with Canstar
To find the cheapest interest rates on car loans, compare them with Canstar. We compare car loans from all the major providers, to find the best interest rates. Keep in mind that the actual interest rates offered can differ depending on factors such as your credit score. Which is why it always pays to check, and if needed improve, your credit score prior to applying for a loan.
The table below displays some of our referral partners’ secured car loan products for a three-year car loan of $10,000 in Auckland (some may have links to lenders’ websites). The products are sorted by Star Rating (highest to lowest) followed by company name (alphabetical). Use Canstar’s personal loan comparison selector to view a wider range of products on Canstar’s database. Canstar may earn a fee for referrals.
Establishment fees, monthly service fees, missed payment fees, extra repayment fees and early repayment fees – the list of fees associated with a loan can become a headache. When comparing loans with similar interest rates, it pays to look into their fees, as they can vary substantially.
Additionally, some fees will be of more concern to you than others. If the loan charges no fees for additional repayments, you may want this option. On the other hand, if you don’t intend to make additional repayments, this fee won’t apply, so shouldn’t influence your decision making.
But some fees are unavoidable and, if high, can eat into any savings a low interest rate provides.
→Related article: Things to Consider Before Getting a Personal Loan
Features and flexibility
Loans come with varying levels of features and flexibility. As mentioned above, some loans charge for the freedom of making additional repayments or paying off a loan early, while some don’t.
Typically, a loan with more flexibility will come with a higher interest rate. But, depending on your needs, the flexibility may be worth it. Of course, as long as the rate isn’t too steep.
If you are able to make additional payments, you could pay off your loan early, reducing its overall cost. So, in this case, the flexibility of making extra payments could be worth it. Of course, as long as you’re not paying too high a rate overall.
Another loan feature that could be a worthwhile option is a redraw facility. This allows you to take back any extra payments you’ve made. This way you can put as much money as possible towards your loan, thus reducing your interest payments, while still having the freedom to take that extra money back should you need to.
Loan terms stretch from just a few months, to a few years. However, while a longer term might look attractive, because it comes with lower monthly repayments, you could end up paying a lot more in interest.
For example, the median car loan interest rate on Canstar’s database is 14.95% p.a. For a loan of $15,000, over:
Three years, you’ll pay: $520 p/m. Total interest on loan: $3706
Five years, you’ll pay: $356 p/m. Total interest on loan: $6387
So while the monthly repayment for a five year loan is less, over the total life of the loan you’ll end up paying extra interest of: $2681.
→Learn more: Canstar’s Car Loan Repayment Calculator
About the author of this page
This report was written by Canstar Content Producer, Andrew Broadley. Andrew is an experienced writer with a wide range of industry experience. Starting out, he cut his teeth working as a writer for print and online magazines, and he has worked in both journalism and editorial roles. His content has covered lifestyle and culture, marketing and, more recently, finance for Canstar.